SIPPRA Advances a Pay for Success Model

While the title of the Act refers to “paying for results,” the Act largely adopts concepts from Pay for Success (PFS), a financing and contracting approach that leverages private capital and ties payment to outcomes. PFS can help governments define desired outcomes and, by accounting for benefits and cost savings across different agency budgets, address the “wrong pockets” problem. With access to upfront working capital, community-based organizations can ramp up capacity — to provide more services to more people and build the infrastructure needed to interface with other community partners, such as health care organizations.

PFS projects often involve targeted, outcomes-oriented investments in SDOH. While this focus can help Medicaid programs achieve policy objectives related to value-based payment and whole-person care, a consistent barrier to integrating the PFS model in Medicaid is uncertainty surrounding the availability of federal matching funds for outcomes-based payments. In order to receive federal matching funds, states must spend Medicaid dollars in a certain way: paying qualified providers for an allowable range of services. Social impact partnerships targeting the Medicaid population often have to adjust for the fiscal realities of managed care organizations and accountable care organizations, which operate under payment models that measure cost and quality performance yearly, as opposed to the longer timeframes in which SDOH interventions generate the biggest rewards.

SIPPRA Allows the Federal Government to Pay for Outcomes

By contrast, SIPPRA allows the Department of the Treasury to pay state or local governments for outcomes. Social impact partnership projects under SIPPRA can last longer — up to seven and a half years — and enable investments in interventions that generate benefits over a longer timeframe. The funding opportunity is intentionally divorced from established government programs like Medicaid and is instead focused on overarching goals. While the federal government — through the Corporation of National and Community Service’s Social Innovation Fund — has supported PFS projects, this will be the first time that the federal government directly funds outcomes-based payments under a Pay for Success model.

SIPPRA explicitly targets social services related to 21 categories of outcomes, including the following relevant to state Medicaid programs:

Reducing teen and unplanned pregnancies;

Improving birth outcomes and early childhood health and development among low-income families and individuals;

Reducing rates of asthma, diabetes, or other preventable diseases among low-income families and individuals to reduce the utilization of emergency and other high-cost care;

Reducing incidences and adverse consequences of child abuse and neglect;

Improving the health and well-being of those with mental, emotional, and behavioral health needs;

Reducing the rate of homelessness among our most vulnerable populations; and

Increasing the independence and employability of individuals who are physically or mentally disabled.

In addition, SIPPRA requires that at least half of all federal payments must be used for initiatives that directly benefit children — a substantial portion of the Medicaid population.

How Does SIPPRA Work?

Here is a step-by-step outline of how states or localities can apply for SIPPRA funding:

Identification of the intervention and partners. Together with service providers, investors, and intermediaries, state or local governments identify an evidence-based intervention that is likely to produce one of the outcomes identified in SIPPRA. SIPPRA defines “intervention” broadly and, unlike many federal programs, does not refer to categories of permissible services — just targeted outcomes. For example, the following interventions have been the focus of recent health-related PFS projects:

Application. The state or local government submits an application to the Department of the Treasury for the social impact partnership that describes, among other things, the proposed intervention, the target population, evaluation design, and the anticipated federal savings if the project is implemented and desired outcomes are achieved.

Approval. Within six months of submission, the Department of the Treasury decides whether or not to enter into an agreement for the social impact partnership project, considering the value of the expected outcomes to the federal government and the likelihood of achieving the outcomes, among other factors. The Department of the Treasury expects to announce results by November 2019.

Implementation of the intervention. The state, local government, or investors fund the delivery of the intervention, and the service provider delivers the intervention to the targeted population.

Evaluation. An independent evaluator submits progress reports and a final report on the outcomes achieved by the intervention.

Outcomes-based payment. Federal funds are awarded to a state or local government only if the project achieves the outcomes stipulated in the agreement with the Department of the Treasury. As noted in the notice of funding availability (NOFA), an applicant may propose a “tiered outcome payment scheme based on levels of success in achieving the outcome,” or include “one or multiple project outcomes and receive separate payments at separate points in time for each outcome achieved.” To the extent investors provide the upfront capital for services, states and local governments may in turn direct outcomes payments to the investors that made initial investments.

How to Learn More

On February 14, the Department of the Treasury made a preliminary version of the NOFA available on its website before official publication in the Federal Register on February 21, 2019. A notice of intent to apply is due April 8, 2019, and SIPPRA applications are due May 22, 2019.

If a state does not have a project that is ready for this funding opportunity, SIPPRA also funds feasibility studies. The Department of the Treasury plans to publish a NOFA for feasibility studies sometime in 2019.

As many states consider how to address social determinants of health and advance value-based payment, we encourage Medicaid stakeholders to think of how Pay for Success and SIPPRA can support their program objectives. If states and localities are interested in applying for SIPPRA funding, technical assistance opportunities are available, including through Quantified Ventures, Social Finance, and Third Sector.